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Going the distance: How harnessing digital payments can help deliver on the SDGs

by Tidhar Wald, September 25, 2015

by Tidar Wald, Government and Corporate Relations Specialist at Better Than Cash Alliance

As global leaders converge in New York to launch the new sustainable development goals this week, we should be proud that extreme poverty has halved or that two billion more people now have clean water since the Millennium Development Goals were adopted in 2000. With results like these, the power of goal setting is difficult to dispute.

But now is not the time for resting on laurels. With 1.4 billion people still living on less than $1.25 a day, we still have a very long way to go.

When the ink dries on the global goals for sustainable development next week, policymakers will face a huge implementation challenge and an urgent need for practical policy mechanisms that can deliver meaningful results. The new targets will be challenging to achieve not least because improvements over the past 15 years came off a much lower baseline of living standards among the world’s poorest people.

Still, past progress and success stories have given rise to some powerful policy lessons that will help pave the way as the world adopts these new goals.

Central among these lessons is the power of digital payments to deliver large-scale change. There is now a growing body of evidence that shifting from cash to digital payments can lead to increased financial inclusion, promoting greater economic opportunity and mobility for countless millions of people, particularly women. Digital payments can also boost productivity, particularly for the small and medium businesses that power most developing economies, deliver huge cost savings and more transparency for governments and provide new sources of growth and jobs.

As actions usually speak louder than words, it’s instructive to look at the growing list of governments that are recognizing the power of digital payments to help meet key development objectives, particularly SDG 1 — ending poverty in all its forms.

The Indian government’s fuel subsidy program — the world’s largest cash transfer program, and a key part of India’s fight against poverty — has already saved $2 billion by paying cooking gas subsidies digitally into recipients’ bank accounts. When India started making social security payments by digital smart cards instead of cash payments, it also saw a 47 percent reduction in bribe demands, helping India on its pathway to SDG 16 which seeks to build just and accountable institutions.

Notably, the government of India has recently joined the Better Than Cash Alliance as it seeks to further boost the role of digital payments within its flagship financial inclusion program — Pradhan Mantri Jan-Dhan Yojana — which has already seen 180 million new bank accounts opened in just one year. Importantly for SDG 5 — which aspires to equality and empowerment of women and girls — evidence from India shows that enabling women to hold funds electronically improves the security of savings, making women eligible for larger loans and increasing economic opportunities.

Digital payments are also proving their capacity to help meet SDG 2 — which aims to end hunger and promote sustainable agriculture. In Malawi in 2013, farmers who were offered digital payment for crop sale proceeds have invested 13 percent more in their farm inputs than those paid in cash. Participating farmers increased the value of their crop outputs by 21 percent, and their household consumption by 11 percent after the harvest.

While these examples illustrate the impact shifting from cash to digital can have on individuals and families, the broader aggregate impact is equally compelling. A study by Moody’s reported that between 2008 and 2012, greater usage of digital payments added $983 billion in global economic growth, and the equivalent of 1.9 million jobs. In the context of the SDG 8 focused on boosting employment for all, this growth impact is substantially greater in developing economies — where digital payments added 0.8 percent to gross domestic product over the period of the Moody’s study, compared to 0.3 percent in developed economies.

Whether it’s ending poverty everywhere, promoting sustainable agriculture, empowering women, or driving sustainable growth and jobs, the power of digital payments delivered responsibly can help bring meaningful progress. As the SDGs gain full speed this week putting us on the path to ending extreme poverty, it’s time to finish the job. It’s now up to leaders across government, business and the development community to harness that power to help deliver on the promise of a more sustainable future.

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Tidhar Wald

Tidhar Wald leads Government Relations and Public Policy at the Better Than Cash Alliance, a UN-based partnership of over 60 governments, companies and international organizations that accelerates the global transition from cash to digital payments in order to drive inclusive growth and reduce poverty. At Better Than Cash Alliance, Tidhar oversees the outreach to governments, companies, international organizations and donor governments towards their commitment to digitize payments responsibly and work together to build digital economies that are inclusive. Prior to his tenure at the Better Than Cash Alliance, Tidhar held positions in political affairs and government relations for over a decade, including at the United Nations, the Organization for Economic Cooperation and Development (OECD) and Oxfam International. Tidhar holds a Master of Public Policy and International Affairs from Harvard University’s Kennedy School of Government and a Bachelors in Political Science and History from Sorbonne University in Paris.